IMF accolades RBI for tightening the monetary policy to curb inflation

The International Monetary Fund (IMF) praised the Reserve Bank of India (RBI) for tightening the monetary policy to curb inflation in the country.

The Director of the Asia and Pacific Department of IMF, Krishna Srinivasan, told PTI that at a time almost every country is slowing, India is doing better and is in a relatively bright spot compared to other countries in the region.

"The RBI has appropriately been tightening to fight inflation as the inflation is above target, and since May, if my memory serves me well, it sort of delivers 190 basis points rate hikes and we think further tightening is needed to bring inflation to its target," PTI quoted Garcia Pascual, Deputy Division Chief of the Monetary and Capital Markets Department of the IMF.

The Financial Counsellor and Director of the Monetary and Capital Markets Department of IMF, Tobias Adrian said that monetary policy has tightened in India, similar to other emerging markets as well, where inflation has been above target.

Adrian confirmed that inflation has been above the RBI's target recently so they expect a tightening of monetary policy going forward as well.

He further added that in terms of financial stability there are some pre-existing vulnerabilities both in the banks and the non-banking system in India that is certainly still there and that is a cause for concern.

Pascual further spoke on financial stability saying that the issues are longstanding, and pertain both to the bank and nonbank.

Adrian commented that on the banking side, the issue is related to prudent underwriting standards to have adequate and build further capital. So it is important to recognize problem loans because that can be a drag.

Mr. Pascual said that If they are left on the balance sheet, it can be a drag to future lending and the recovery of the banking system, and those they see as the key issues.

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